Why Are Americans Drilling For Oil More Than Ever?

March 16, 2012

Oil production continues to rise on the back of a natural gas depression. Cutbacks by producers mean that the number of rigs drilling for natural gas dropped this week for the 10th straight week, reaching a 10-year low. The count dropped by seven to 663, the lowest since May 2002, according to a report released by the oil services firm Baker Hughes on Friday.

In contrast, the more profitable oil rig count rose to a 25-year high of 1,317, up 21 this week. The figure is 57 percent higher than the 839 oil rigs in the U.S. last year.

The week’s total count for rigs actively exploring for oil or natural gas was up by 11 to 1,984. This week last year, there were 1,720 active rigs. Oklahoma gained 12 rigs, Colorado added four, and Alaska and North Dakota reported one new rig each each.

Natural gas has suffered from low demand and record high output, forcing big production cuts. The American Chesapeake (NYSE:CHK) and Canada’s EnCana (NYSE:ECA) have announced cuts that total more than 1 billion cubic feet per day, or nearly 2 percent of estimated annual production, according to Reuters.

Domestic oil production, on the other hand, increased by an estimated 120,000 barrels a day last year, compared to 2010, according to a U.S. government report from earlier this week. The current production of 5.6 million barrels a day is the highest since 2003. Horizontal drilling rigs used in shale drilling numbered 1,180, rising by 16 this week.

To contact the reporter on this story: Aabha Rathee at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com